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Tax year 2026/27 Last reviewed: 19 October 2026
UK Property and Landlord Tax 2026/27: what landlords pay and claim
For 2026/27 you pay Income Tax on your rental profit, which is your rent less allowable expenses, at the same rates as your other income. You can use the £1,000 property allowance instead of expenses. If you have a residential mortgage in your own name, you cannot deduct the interest. You get a tax reduction of 20% of it instead.
Landlords meet three kinds of tax: Income Tax on the rent, extra stamp duty when buying an additional home and Capital Gains Tax when selling. The figures below are for the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, unless a later year is named. Your other income sets your rate, so read this alongside our Income Tax guide and our Capital Gains Tax guide.
Key takeaways
- Rental profit is taxed as part of your income at your usual rates: 20%, 40% and 45% in England, Wales and Northern Ireland, and Scottish rates if you are a Scottish taxpayer.
- The £1,000 property allowance is an alternative to deducting expenses. Use whichever gives the lower profit.
- Individual landlords cannot deduct residential mortgage interest. They get a tax reduction of 20% of the finance costs, capped at the lowest of the finance costs, the property profit and income above the Personal Allowance.
- Rent a Room relief makes £7,500 a year of receipts from a furnished room in your home tax-free, or £3,750 if the income is shared.
- The furnished holiday lettings regime ended on 6 April 2025. Holiday lets now follow the same rules as other rented property.
- Making Tax Digital for Income Tax starts on 6 April 2026 if your qualifying income was over £50,000 in 2024/25, then 6 April 2027 for over £30,000 and 6 April 2028 for over £20,000. Late quarterly updates earn no penalty points in 2026/27.
- Buying an additional home costs 5% extra Stamp Duty in England and Northern Ireland, an 8% Additional Dwelling Supplement in Scotland and higher Land Transaction Tax rates in Wales.
- Selling a rental property can bring Capital Gains Tax at 18% or 24%, reported and paid within 60 days of completion.
- From 6 April 2027, rental profit in England, Wales and Northern Ireland is taxed at 22%, 42% and 47%, and the finance cost tax reduction rises to 22%.
How is rental income taxed in 2026/27?
Rental profit is taxed as part of your income at your usual Income Tax rates. In England, Wales and Northern Ireland those are 20%, 40% and 45%. Scottish taxpayers pay Scottish rates on rental profit. Your profit is your rent less allowable expenses, or less the £1,000 property allowance if that is better for you.
Rental income is the rent you get from tenants. It includes payments for furniture and for extra services you provide, such as cleaning communal areas, hot water or heating. If you rent out more than one property, you add the profits and losses together into one result for your UK property business. Overseas properties are kept separate. See GOV.UK on working out your rental income.
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Source: GOV.UK, Income Tax rates and Personal Allowances. The Personal Allowance falls by £1 for every £2 of adjusted net income above £100,000, and is nil at £125,140. Welsh rates are the same for 2026/27 (GOV.UK).
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Starter rate | £12,571 to £16,537 | 19% |
| Basic rate | £16,538 to £29,526 | 20% |
| Intermediate rate | £29,527 to £43,662 | 21% |
| Higher rate | £43,663 to £75,000 | 42% |
| Advanced rate | £75,001 to £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
Source: GOV.UK, Income Tax in Scotland. Income Tax Act 2007 section 11A charges the non-savings income of a Scottish taxpayer at Scottish rates, and property income is not savings income. Whether you are a Scottish taxpayer decides the rates, wherever the property is.
Do you have to tell HMRC about rental income?
You do not need to tell HMRC if your gross property income is £1,000 or less, unless you cannot use the property allowance. If it is over £1,000 and up to £2,500, contact HMRC. If it is over £2,500, register for Self Assessment. If you do not already file a tax return, tell HMRC by 5 October after the tax year in which you had profits. GOV.UK has a tool to check whether you need to tell HMRC about your rental income.
Worked example: £10,000 of rental profit on top of a £30,000 salary
| Step | England, Wales and Northern Ireland | Scotland |
|---|---|---|
| Rent received | £12,000 | £12,000 |
| Allowable expenses | −£2,000 | −£2,000 |
| Rental profit | £10,000 | £10,000 |
| Tax on the £30,000 salary alone | £3,486 | £3,451 |
| Tax on the salary and the rental profit | £5,486 | £5,551 |
| Extra tax caused by the rental profit | £2,000 | £2,100 |
Assumes the standard Personal Allowance of £12,570, no other income and no finance costs. In England the whole profit is taxed at 20%. In Scotland it falls in the 21% intermediate band. Scottish figures are rounded to the nearest pound (£3,451.07 and £5,551.07).
What can you deduct from rental income?
You can deduct costs that are wholly and exclusively for renting out the property, such as repairs, insurance, letting agent fees and accountancy. You cannot deduct improvements, the capital part of a mortgage payment or mortgage interest on a residential let. As an alternative to claiming expenses, you can use the £1,000 property allowance.
- General maintenance and repairs to the property.
- Water rates, Council Tax, gas and electricity.
- Landlord insurance for the building, contents and public liability.
- The cost of services, including gardeners and cleaners.
- Letting agent and management fees, and accountant's fees.
- Legal fees for lets of a year or less, or for renewing a lease for less than 50 years.
- Rents if you sub-let, ground rents and service charges.
- Direct costs such as phone calls, stationery and advertising for new tenants.
- The business share of vehicle running costs.
You cannot claim improvements or other capital expenses, the full mortgage payment, private phone calls, clothing or personal expenses. Keep records of capital costs, because they can reduce a Capital Gains Tax gain when you sell. See GOV.UK's guidance on working out your rental income.
Is it a repair or an improvement?
A repair restores something to its original condition, for example replacing a broken boiler or roof tiles blown off in a storm. Replacing a part with the nearest modern equivalent is still a repair, such as swapping a single-glazed window for a double-glazed one. An extension, or replacing a kitchen with a higher specification one, is a capital cost and not an allowable expense.
What is replacement of domestic items relief?
If you let a dwelling house, you can deduct the cost of replacing domestic items such as beds, free-standing wardrobes, curtains, carpets, fridges, televisions and crockery. You cannot claim it for the first purchase of an item, or if you rent a room in your own home. If the new item is an improvement, you can only deduct the cost of an equivalent to the old one.
The deduction is the cost of the new item plus any incidental costs, less what you received for the old one. Suppose you replace a fridge-freezer with a £600 model and sell the old one for £50. The deduction is £550.
Should you use the property allowance or claim expenses?
The property allowance gives you up to £1,000 a year tax-free. If your gross property income is more than £1,000, you can deduct the allowance instead of your expenses, but you cannot do both. It cannot create a loss. If you own a property jointly, each owner can use their own £1,000 against their share of the income. You cannot use it if you claim the finance cost tax reduction, if you use Rent a Room, or if the income comes from a company you control, a partnership you are in or your employer.
| Rent received | Actual expenses | Profit using the allowance | Profit using expenses | Lower profit |
|---|---|---|---|---|
| £1,800 | £300 | £800 | £1,500 | Allowance |
| £1,800 | £1,200 | £800 | £600 | Expenses |
Source for the rules: GOV.UK, tax-free allowances on property and trading income.
How does Rent a Room relief work?
Rent a Room relief lets you receive up to £7,500 a year tax-free from letting furnished accommodation in your only or main home. The limit is £3,750 if someone else also receives income from the letting, such as a joint owner. Above the limit you choose between paying tax on your actual profit or on your receipts over the limit.
If your receipts are under the limit, the exemption is automatic and you do not need to do anything. If they are over it, you must complete a tax return. Receipts include rent, and anything you charge for meals, goods and services such as cleaning or laundry. The scheme covers a lodger, and a guest house or bed and breakfast run from your home. It does not cover accommodation that is unfurnished, used as an office or business, or part of a UK home you let while you live abroad.
Above the limit, HMRC's helpsheet HS223 sets out two methods. Under Method A you pay tax on your actual profit, which is receipts less expenses and capital allowances. Under Method B you pay tax on receipts over the limit and deduct no expenses. HMRC uses Method A unless you ask for Method B. You make the election, or withdraw it, by the first anniversary of the 31 January filing date for the tax year, or a later date HMRC allows. That is 31 January 2028 for 2025/26 and 31 January 2029 for 2026/27 (Income Tax (Trading and Other Income) Act 2005 section 800). An election carries on for later years until you withdraw it.
| Receipts | Expenses | Method A: taxable profit | Method B: taxable amount | Lower |
|---|---|---|---|---|
| £9,000 | £1,200 | £7,800 | £1,500 | Method B |
| £10,600 | £9,000 | £1,600 | £3,100 | Method A |
The second row is the example in HMRC helpsheet HS223. Method B is receipts minus £7,500.
You cannot create a loss under the exemption or Method B. If you want to claim a loss, ask HMRC to tax you on your actual profit, by the same deadline (section 799). See GOV.UK's Rent a Room guidance. The Rent a Room limit and the property allowance do not change in April 2027.
How does the finance cost restriction (Section 24) work?
If you let residential property as an individual, you cannot deduct mortgage interest from your rent. You get a tax reduction instead, worth the basic rate of 20% on the lowest of your finance costs, your property profit and your income above the Personal Allowance. Any finance costs you cannot use are carried forward.
Finance costs include interest on mortgages, loans (including loans to buy furnishings) and overdrafts, plus arrangement fees and other costs of getting or repaying a loan. The restriction applies to individuals, partnerships and trustees who let residential property, whether they live in the UK or abroad. It has been fully in place since 6 April 2020. Companies are not affected. See GOV.UK on how the tax reduction is worked out.
Worked example: a higher rate landlord
| Step | Amount |
|---|---|
| Rent received | £20,000 |
| Allowable expenses | −£3,000 |
| Mortgage interest (not deductible) | £12,000 |
| Rental profit that is taxed | £17,000 |
| Tax on the profit at 40% | £6,800 |
| Tax reduction: 20% of £12,000 | −£2,400 |
| Income Tax on the rental profit | £4,400 |
| Cash left after expenses, interest and tax | £600 |
Assumes a salary of £60,000, so all the rental profit is taxed at 40%. Before the restriction, the interest was deducted: profit £5,000, tax £2,000.
Worked example: the cap and carrying costs forward
| Step | Amount |
|---|---|
| Salary | £36,000 |
| Rent received | £20,000 |
| Allowable expenses | −£7,000 |
| Rental profit | £13,000 |
| Finance costs | £15,000 |
| Income above the Personal Allowance | £36,430 |
| Lowest of the three | £13,000 |
| Tax reduction at 20% | £2,600 |
| Finance costs carried forward | £2,000 |
Total income is £49,000, so the income above the £12,570 Personal Allowance is £36,430. Tax on the salary alone is £4,686. Tax on the salary and the rent is £7,286 before the reduction and £4,686 after it. The reduction cannot create a refund.
You can check your own figures with our buy-to-let tax calculator.
Does a limited company avoid the restriction?
A company gets relief for interest through the loan relationship rules, so the restriction does not apply to it, according to HMRC's Property Income Manual. A company pays Corporation Tax at 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between. Companies that buy residential property pay the higher Stamp Duty Land Tax rates, and profits taken out as dividends are taxed on the shareholder, at 10.75%, 35.75% or 39.35% depending on their income, from 6 April 2026. Moving property you already own into a company can also bring Capital Gains Tax and Stamp Duty Land Tax. Take advice first.
What changed when furnished holiday lets were abolished?
The furnished holiday lettings regime ended on 6 April 2025 for Income Tax and Capital Gains Tax, and 1 April 2025 for Corporation Tax. A holiday let is now taxed like other rented property. It faces the finance cost restriction and loses capital allowances for new furnishings and Business Asset Disposal Relief. Its profits no longer count as pension earnings.
- Finance costs: individual landlords now get the 20% tax reduction instead of a full deduction. Companies are not affected.
- Capital allowances: new spending on furniture and fixtures no longer qualifies. Replacement of domestic items relief applies to replacements. Existing capital allowance pools can still be written down until they are used up.
- Capital Gains Tax reliefs: rollover relief, Business Asset Disposal Relief, gift relief and relief for loans to traders no longer apply to a holiday let business disposed of on or after 6 April 2025. There are exceptions where the business itself ceased before that date.
- Pensions: holiday let profits no longer count as relevant UK earnings when working out the maximum tax relief on pension contributions.
- Losses: unused holiday let losses are treated as losses of your UK or overseas property business and can be set against its future profits.
- Joint owners: spouses and civil partners who own a holiday let are taxed in equal shares unless they have sent HMRC Form 17.
Holiday accommodation is still standard rated for VAT, and the Council Tax and business rates rules stay the same. General expenses such as utilities, repairs and cleaning products can still be claimed. GOV.UK says the Income Tax rules are the same whether you keep letting holiday accommodation or move to a longer let.
The sources are HMRC's policy paper on the abolition, its clarification, Finance Act 2025 Schedule 5 and HMRC Capital Gains Manual CG73505.
How do joint ownership and non-resident landlord rules work?
Married couples and civil partners who live together are taxed on jointly owned rental income in equal shares by default. If you own in unequal shares, you can ask HMRC to tax the income in those shares by sending Form 17 within 60 days of your declaration. Landlords who live abroad normally have basic rate tax deducted from their rent.
Joint ownership and Form 17
If you live with your spouse or civil partner, HMRC taxes jointly owned rental income as if you each had half. To be taxed on your real shares, you and your partner must both be entitled to the income in the same unequal shares as you own the property. You then make a joint declaration on Form 17 and provide evidence such as a declaration or deed. HMRC must be told within 60 days of the date of the declaration. It applies to income from that date and continues until your shares change.
If you own with someone who is not your spouse or civil partner, your share of the profit or loss usually follows your share of the property, unless you agree a different split. Each owner reports their own share. Each can use the £1,000 property allowance against their own share of the gross income, and the Rent a Room limit halves to £3,750.
Landlords who live abroad
If your usual home is outside the UK, a letting agent or tenant normally deducts basic rate tax from your rent, after expenses they have paid, and pays it to HMRC. A tenant only has to do this if there is no agent and the rent is more than £100 a week. You can apply to HMRC to receive rent in full, using form NRL1i, but HMRC will not approve you if your UK taxes are not up to date. You still declare the income on a Self Assessment return, including the residence and UK property pages. If you are refunded tax because your rental income is below your Personal Allowance, you claim it on form R43. See GOV.UK on letting property abroad and the Non-resident Landlords Scheme.
Which landlords must use Making Tax Digital?
You must use Making Tax Digital for Income Tax if you are a landlord or sole trader registered for Self Assessment and your qualifying income is over the threshold. That is £50,000 from 6 April 2026, £30,000 from 6 April 2027 and £20,000 from 6 April 2028. Qualifying income is gross property and self-employment income before expenses.
| Qualifying income in | Threshold | You start on |
|---|---|---|
| 2024/25 | Over £50,000 | 6 April 2026 |
| 2025/26 | Over £30,000 | 6 April 2027 |
| 2026/27 | Over £20,000 | 6 April 2028 |
Source: GOV.UK, find out if and when you need to use Making Tax Digital for Income Tax. Partnerships will join later, on a date to be set.
Qualifying income is your total income from self-employment and property before expenses, taken from your tax return for the earlier year. Employment, dividends, pensions and a partnership profit share do not count. For a jointly owned property, your share counts. For example, £25,000 of gross rent plus £27,000 of self-employment income is £52,000. HMRC writes to people it thinks are affected, but it is your responsibility to check, with or without a letter. You still send a Self Assessment return for the year before you start. See GOV.UK on working out your qualifying income.
What do you have to do under Making Tax Digital?
You keep digital records of your income and expenses in software that works with Making Tax Digital for Income Tax. HMRC does not provide the software. If you use more than one product, they must be digitally linked, and you cannot copy records between them by hand. Every 3 months the software sends HMRC a quarterly update for each property business. It is a summary of income and expenses for the tax year so far, not a tax return, and you must send one even if you had no income or costs. For jointly let properties you can send income only, then report the expenses by resending your fourth update after the end of the tax year. You then submit your tax return using the software by 31 January after the tax year.
| Update period | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May (following tax year) |
If your accounting period is 1 April to 31 March you can use calendar update periods. The deadlines are the same. Source: GOV.UK, send quarterly updates.
What are the penalties?
There are no penalty points for missing a quarterly update deadline in 2026/27. From 2027/28, each missed quarterly update or tax return deadline earns a point. At 4 points you get a £200 penalty, and another £200 each time you miss a further deadline. Late payment penalties and interest also apply. Read GOV.UK on penalties for Making Tax Digital for Income Tax.
How much extra tax do you pay when you buy a rental property?
In England and Northern Ireland you pay 5% on top of the standard Stamp Duty Land Tax rates when you buy an additional residential property worth £40,000 or more. Scotland charges an Additional Dwelling Supplement of 8% of the price. Wales has its own higher residential Land Transaction Tax rates, from 5% to 17%.
| Part of the price | Standard rate | Higher rate (additional property) |
|---|---|---|
| Up to £125,000 | 0% | 5% |
| £125,001 to £250,000 | 2% | 7% |
| £250,001 to £925,000 | 5% | 10% |
| £925,001 to £1.5 million | 10% | 15% |
| Over £1.5 million | 12% | 17% |
Source: GOV.UK, higher rates of Stamp Duty Land Tax and residential property rates. For purchases with an effective date before 31 October 2024 the extra rate was 3% (GOV.UK).
You pay the higher rates if the new property is not the only residential property worth £40,000 or more that you own anywhere in the world, and you have not sold or given away your previous main home. Your spouse or civil partner counts as buying with you. Companies pay the higher rates on any residential property worth £40,000 or more that they buy. Buyers who are not UK resident pay a further 2%. If you buy 6 or more properties on or after 1 June 2024, the non-residential rates apply instead. You must send your return within 14 days of the effective date.
| Nation and tax | Standard rates only | With the extra charge | Extra cost |
|---|---|---|---|
| England and Northern Ireland: Stamp Duty Land Tax | £7,500 | £25,000 | £17,500 |
| Scotland: Land and Buildings Transaction Tax and the 8% Additional Dwelling Supplement | £8,350 | £36,350 | £28,000 |
| Wales: Land Transaction Tax | £7,500 | £24,950 | £17,450 |
Calculated from the published rates. Standard Scottish rates are 0% to £145,000, 2% to £250,000, 5% to £325,000, 10% to £750,000 and 12% above. Standard Welsh rates are 0% to £225,000, 6% to £400,000, 7.5% to £750,000, 10% to £1.5 million and 12% above. The English extra cost is 5% of the whole price (£17,500).
What are the Scottish and Welsh charges?
In Scotland the Additional Dwelling Supplement is 8% of the whole purchase price on transactions from 5 December 2024. It applies when you buy a second home or rental property and already own another dwelling worth £40,000 or more, unless you are replacing your main residence. Revenue Scotland explains it on its Additional Dwelling Supplement page.
| Part of the price | Rate |
|---|---|
| Up to £180,000 | 5% |
| £180,001 to £250,000 | 8.5% |
| £250,001 to £400,000 | 10% |
| £400,001 to £750,000 | 12.5% |
| £750,001 to £1.5 million | 15% |
| Over £1.5 million | 17% |
Source: GOV.WALES, Land Transaction Tax rates and bands. Replacing your main residence may mean the higher rates do not apply.
Can you get the extra charge back?
In England and Northern Ireland, you can claim a refund of the higher rate part if you sell or give away your previous main home within 3 years of buying the new one. Claim within 12 months of whichever is later: the sale of the previous home or the filing date of the return for the new one. You cannot claim if you or your spouse still own part of the old home. In Scotland you can claim a repayment of the Additional Dwelling Supplement if you sell your previous main residence within 36 months of buying the new one and you live in the new property as your main residence.
How is Capital Gains Tax charged when you sell a rental property?
Selling a rental property can trigger Capital Gains Tax on your gain above the £3,000 annual exempt amount. The rates are 18% within your basic rate band and 24% above it. You must report and pay any tax due on UK residential property within 60 days of completion, using a Capital Gains Tax on UK property account.
Your gain is usually what you sold the property for less what you paid. You can deduct the costs of buying, selling and improving it, such as estate agents' and solicitors' fees and improvement works like an extension. Normal maintenance such as decorating does not count. If you own the property jointly, work out the gain on your share and report your own gain or loss. If you buy and sell property as a business, you pay Income Tax or Corporation Tax instead of Capital Gains Tax. See GOV.UK, tax when you sell property.
| Step | Amount |
|---|---|
| Sale price | £320,000 |
| Purchase price | −£200,000 |
| Improvement costs | −£15,000 |
| Costs of selling | −£8,000 |
| Gain | £97,000 |
| Annual exempt amount | −£3,000 |
| Taxable gain | £94,000 |
| Capital Gains Tax at 24% (higher rate taxpayer) | £22,560 |
The same example appears in our Capital Gains Tax guide. Your rate is 18% on the part of the gain within your unused basic rate band and 24% above it. Source: GOV.UK, Capital Gains Tax rates.
What if you lived in the property before letting it?
Private Residence Relief covers the years you lived in the home as your main home, and always the last 9 months you owned it. GOV.UK's example is a gain of £120,000 on a home owned for 15 years, lived in for 7.5 years and then let for 7.5 years. Relief covers 8.25 of the 15 years, which is 55%, so £66,000 of the gain is relieved and £54,000 is a chargeable gain. If you lived in the home at the same time as your tenants, you may also qualify for Letting Relief. See GOV.UK, tax when you sell your home.
How does the 60-day rule work?
You report and pay any Capital Gains Tax on UK residential property within 60 days of completing the sale. Use a Capital Gains Tax on UK property account. If you cannot use the online service, complete an online form, print it and send it to HMRC. If you are registered for Self Assessment, you also include the sale on your tax return. A UK resident whose total gains are below the tax-free allowance does not need to report them online. A non-resident must report every UK property sale, even with no tax to pay. A late return gets a £100 penalty, with more possible after 3, 6 and 12 months under Finance Act 2009 Schedule 55, and GOV.UK says you may also owe interest and a penalty if you do not pay on time. Read GOV.UK, report and pay your Capital Gains Tax.
What changes for landlords from April 2027?
From 6 April 2027, rental profit in England, Wales and Northern Ireland is taxed at separate property rates of 22%, 42% and 47%. The finance cost tax reduction rises from 20% to 22%. The property allowance and the Rent a Room limit do not change. Finance Act 2026 sets the rates for 2027/28.
| 2026/27 | 2027/28 | |
|---|---|---|
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
| Finance cost tax reduction | 20% | 22% |
| Property allowance | £1,000 | £1,000 |
| Rent a Room limit | £7,500 | £7,500 |
Sources: Finance Act 2026 section 7, HMRC's technical note and Income Tax Act 2007 section 6D, inserted by Finance Act 2026 section 6. The 2027/28 reduction rate comes from Schedule 1 paragraph 40 of the Act, which amends Income Tax (Trading and Other Income) Act 2005 section 274AA(5).
Property income will be taxed after your other income and before savings and dividends. Your Personal Allowance and other reliefs are set against income that is not from property, savings or dividends first. From April 2027 the withholding rate under the Non-resident Landlords Scheme will follow the new property basic rate. The 22%, 42% and 47% rates apply in England, Wales and Northern Ireland. Scotland and Wales will be able to set their own property income rates once the powers in Finance Act 2026 section 8 and Schedule 2 are commenced.
| Landlord | 2026/27 tax on rental profit | 2027/28 tax on rental profit |
|---|---|---|
| £30,000 salary, £10,000 rental profit, no finance costs | £2,000 | £2,200 |
| £60,000 salary, £20,000 rent, £3,000 expenses, £12,000 interest | £4,400 | £4,500 |
Assumes the same income and bands in both years and the standard Personal Allowance. For the second landlord, 2027/28 tax on the profit is £7,140 at 42% less a £2,640 reduction at 22%.
Frequently asked questions about property and landlord tax
How is rental income taxed in 2026/27?
Your rental profit is added to your other income and taxed at your normal rates. In England, Wales and Northern Ireland that is 20%, 40% or 45%. Scottish taxpayers pay Scottish rates. Your profit is your rent less allowable expenses, or less the £1,000 property allowance if you use that instead.
Can I deduct mortgage interest from my rental income?
Not on a residential let if you own it as an individual. You get a tax reduction of 20% of your finance costs instead. It is limited to the lowest of your finance costs, your property profit and your income above the Personal Allowance. Any costs you cannot use carry forward. Companies are not affected.
How does Rent a Room relief work?
You can receive up to £7,500 a year tax-free from letting furnished accommodation in your main home, or £3,750 if the income is shared. Above the limit you can pay tax on your actual profit or on your receipts over the limit with no expenses. HMRC uses actual profit unless you ask for the other method.
Are furnished holiday lets still taxed differently?
No. The furnished holiday lettings regime ended on 6 April 2025 for Income Tax and Capital Gains Tax. Holiday lets now follow the rules for other rented property, including the finance cost restriction and replacement of domestic items relief. Business Asset Disposal Relief no longer applies to a disposal of a holiday let business.
Do I need to use Making Tax Digital as a landlord?
You do if you are registered for Self Assessment and your qualifying income, which is gross property and self-employment income, was over £50,000 in 2024/25. The threshold falls to £30,000 for 2025/26 income, starting 6 April 2027, and £20,000 for 2026/27 income, starting 6 April 2028.
How much extra Stamp Duty do I pay on a buy-to-let?
In England and Northern Ireland you pay 5% on top of the standard rates, so £25,000 instead of £7,500 on a £350,000 purchase. Scotland adds an 8% Additional Dwelling Supplement, and Wales has higher Land Transaction Tax rates of 5% to 17%. Each applies when you already own another home.
How long do I have to report Capital Gains Tax on a rental property sale?
You must report and pay any Capital Gains Tax due on UK residential property within 60 days of completion, using a Capital Gains Tax on UK property account. The rates are 18% within your basic rate band and 24% above it, after the £3,000 annual exempt amount. A late return gets a £100 penalty, with more to follow.
What changes for landlords in April 2027?
From 6 April 2027, rental profit in England, Wales and Northern Ireland is taxed at 22%, 42% and 47%, instead of 20%, 40% and 45%. The finance cost tax reduction rises to 22%. The £1,000 property allowance and the £7,500 Rent a Room limit stay the same.
Where can you read more?
UK tax hub
Every UK tax type in one place.
Income Tax
Bands, rates and how your other income sets your rate on rental profit.
Capital Gains Tax
Rates, the annual exempt amount and the 60-day rule for property sales.
HMRC rules and compliance
Self Assessment deadlines, Making Tax Digital and penalties.
Planning and strategies
Pensions, salary sacrifice and business exit planning.
Buy-to-let tax calculator
Estimate the Income Tax on rental profit, including the finance cost tax reduction.
Stocks and shares ISAs
Keep gains and dividends tax-free.
Primary sources
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: Income Tax in Scotland
- GOV.UK: Income Tax in Wales
- GOV.UK: Work out your rental income when you let property
- GOV.UK: Tax-free allowances on property and trading income
- GOV.UK: Tax relief for residential landlords, how it's worked out
- GOV.UK: Rent a room in your home
- HMRC helpsheet HS223: Rent a Room Scheme 2026
- GOV.UK: Declare beneficial interests in joint property and income (Form 17)
- GOV.UK: Non-resident Landlords Scheme
- GOV.UK: Furnished holiday lettings tax regime abolition
- GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax
- GOV.UK: Penalties for Making Tax Digital for Income Tax
- GOV.UK: Higher rates of Stamp Duty Land Tax
- Revenue Scotland: Additional Dwelling Supplement
- GOV.WALES: Land Transaction Tax rates and bands
- GOV.UK: Tax when you sell property
- GOV.UK: Report and pay your Capital Gains Tax
- GOV.UK: Corporation Tax rates, expenses and reliefs
- HMRC: Change to tax rates for property, savings and dividend income, technical note
- legislation.gov.uk: Finance Act 2026 section 7
- legislation.gov.uk: Finance Act 2025 Schedule 5
- legislation.gov.uk: Income Tax Act 2007 section 837
- legislation.gov.uk: Income Tax (Trading and Other Income) Act 2005 section 274AA
- legislation.gov.uk: Income Tax (Trading and Other Income) Act 2005 section 800
What should you check as a landlord this year?
Check whether your property and self-employment income puts you in Making Tax Digital, and whether the £1,000 allowance or your actual expenses give the lower profit. Work out your finance cost tax reduction. If you sell, report and pay Capital Gains Tax within 60 days of completion. File your 2025/26 return online and pay by 31 January 2027.
Add up the rent you received and your allowable expenses for the tax year, and compare them with the £1,000 property allowance.
If you own residential property in your own name with a mortgage, work out the 20% tax reduction and any finance costs to carry forward.
Check your qualifying income against the Making Tax Digital thresholds: over £50,000 from April 2026, over £30,000 from April 2027 and over £20,000 from April 2028.
If you own property with your spouse or civil partner in unequal shares, send HMRC Form 17 within 60 days of your declaration.
Before buying another home, work out the extra Stamp Duty Land Tax, Additional Dwelling Supplement or Land Transaction Tax.
Before selling, work out the gain and report and pay any Capital Gains Tax within 60 days of completion.
Plan for the 2027/28 property rates of 22%, 42% and 47% and the 22% finance cost tax reduction.
TaxYZ provides educational information only and is not regulated by the FCA, ICAEW, or ARLA. Property taxation is highly complex and circumstance-specific. All figures reflect 2026/27 rates and legislation published by GOV.UK, HMRC, Revenue Scotland and GOV.WALES, unless a later tax year is stated. This page does not constitute tax, legal, investment, or financial advice. Always consult a qualified tax adviser or chartered accountant before making property investment, disposal, or restructuring decisions.